Agricultural Income Supported by Revenue Records and Bank Receipts Cannot Justify Revision: ITAT Quashes Action Against ₹41.63 Lakh Claim [Read Order]

The Income Tax Appellate Tribunal (ITAT)Rajkot Bench has quashed revision proceedings initiated under Section 263 ofthe Income Tax Act 1961 holding that agricultural income supported by revenue records, crop details, bank receipts and independent verification by the Assessing Officer (AO) could not justify revisionary action merely because the Principal Commissioner of Income Tax (PCIT) desired deeper inquiry.

The appeal was filed by Kamdar Kiritkumar Chandulal HUF against the order passed by the PCIT, Rajkot-1 for the Assessment Year 2020-21.The assessee had filed its return declaring nil taxable income and agricultural income of ₹41.63 lakh. The case was selected for limited scrutiny on the issue of unusually high agricultural income in comparison to average agricultural income in the region. The assessment was completed under Section 143(3) read with Section 144B accepting the returned income.

Subsequently, the PCIT invoked revisionary jurisdiction under Section 263 alleging that the AO failed to conduct proper inquiry regarding agricultural expenses of ₹5.65 lakh and had not fully verified the agricultural income claim of ₹47.28 lakh. According to the PCIT, the assessee had furnished sale bills only for part of the agricultural receipts and the AO failed to examine production details, manpower, transportation and crop yield.

The assessee stated that extensive details had already been furnished during assessment proceedings, including land records, crop-wise details, Talati certificates, bank statements, cash flow statements, sale bills and agricultural expense details. It was further argued that the AO had issued detailed notices under Section 142(1) and even conducted independent verification through notices issued under Section 133(6).

The Tribunal comprising Dr. Arjun Lal Saini and Dr. Dinesh Mohan Sinha observed that the AO had conducted thorough and exhaustive inquiries before framing the assessment. The Bench noted that the assessment records clearly showed verification of agricultural land holdings productivity, crop details, banking transactions and supporting documentary evidence.

The Tribunal held that merely because the PCIT considered the inquiry inadequate the assessment order could not be termed erroneous and prejudicial to the interests of the Revenue.Thus, the bench quashed the revision proceedings and allowed the assessee’s appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates